Reduced OASDI rate in Feb. 1 payroll

On Dec. 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. Included in the Act was a provision that temporarily reduced the OASDI (Social Security's Old-Age, Survivors and Disability Insurance) withholding rate from 6.2 percent to 4.2 percent for the first two months of 2012.

This change was effective with paychecks (and direct deposit) issued on or after Jan. 1, 2012. Because the law was enacted so close to the end of the calendar year, the IRS allowed employers until Jan. 31, 2012, to implement this withholding change.

For monthly paid UC employees, the change could not be implemented in time for the Jan. 1, 2012, pay due to the late issuance of the IRS instructions implementing the new tax rates. UC employees paid on Feb. 1, 2012, received a 2 percent refund in their Social Security tax because the Jan. 1 paycheck (or direct deposit) they received was subject to withholding at the old rate (6.2 percent). As a result, the net Social Security withholding for the Feb. 1 pay is 2.2 percent.